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Presentation of Q1–Q3 2018 results
KRUK Group
October 28th 2018
2
Agenda
Introduction
Operating activities
Financial performance
Additional information
-18% Q1-Q3/Q1-
Q3
+42% Q1-Q3/Q1-
Q3
+47% Q1-
Q3/Q1-Q3
3
KRUK’s net profit after the first three quarters of 2018 represents 95% of the 2017 full-year figure, with investments exceeding PLN 1bn
NET PROFIT CASH EBITDA*RECOVERIES FROM
PURCHASED DEBT PORTFOLIOS INVESTMENTS
221205
223
256 248
Q3: PLN 90m FY 2017: PLN 295m
Q3: PLN 248m FY 2017: PLN 839m
Q3: PLN 381m FY 2017: PLN 1,369m
Q3: PLN 647m FY 2017: PLN 977m
261210
125
282
647
347375 362
401381
200
80
200 20060
10040
100
20
+57% Q1-Q3/Q1-
Q3Q3 2018
Q3 2018
Q3 2017
Q3 2018
Q3 2017
Q3 2018
Q3 2017
Q3 2018
MARKET CAPITALISATION**
YTD: -21%Since IPO: +406%
PORTFOLIOCARRYING AMOUNT
Jun 30 2018: PLN 3.5bnDec 31 2017: PLN 3.1bn
NET DEBT/EQUITY
Jun 30 2018: 1.1xDec 31 2017: 1.1x
NET PROFIT MARGIN
FY 2017: 28%
*- Cash EBITDA = EBITDA + recoveries from purchased debt portfolios - revenue from collection of purchased debt.** - As at October 23rd, 2018
744
91 99 90
4
KRUK's rising investments in debt portfolios will fuel growth of recoveries in the future
Purchased debt portfolios Third party DC and other services*
702
994
1,144
Q1-Q32016
Q1-Q32017
Q1-Q32018
Cash recoveries (PLNm)
39
63
68
Q1-Q32016
Q1-Q32017
Q1-Q32018
Revenues (PLNm)
936
767
1,055
Q1-Q32016
Q1-Q32017
Q1-Q32018
Investments (PLNm)
12
25
22
Q1-Q32016
Q1-Q32017
Q1-Q32018
Gross profit (PLNm)
(PLNm) Q1-Q3 2017 change Q1-Q3 2018 2017% of 2017 full-
year figure
Revenue 806.9 +11% 893.5 1,055.5 85%
EBIT 368.0 +7% 393.5 420.8 94%
Cash EBITDA 631.1 +15% 727.6 836.6 87%
Net profit 291.3 -4% 279.3 295.2 95%
ROE rolling 23.8% - 16.6% 20.2% -
** - ERIF Biuro Informacji Gospodarczej, Novum loans.
5
In Q3 2018, KRUK stepped up investments in debt portfolios and purchased large portfolios in Italy and Spain
High net profit▪ Net profit for Q1−Q3 2018 was PLN 279m, representing 95% of the full-year figure reported for 2017, with
net profit margin at 31%.▪ In Q3 alone, net profit reached PLN 90m.
▪ Recoveries in the past three quarters totalled PLN 1,144m, or 84% of the figure reported for the whole of 2017.
▪ In Q3 2018 recoveries from purchased debt portfolios amounted to PLN 381m. Recoveries
Investments in new portfolios
▪ In the first three quarters of the year, KRUK invested PLN 1,055m in 141 portfolios with a total nominal value of PLN 6.2bn. In geographical terms, Poland accounted for the largest share of the investments (PLN 521m), followed by Italy (PLN 267m), Spain (PLN 166m), and Romania (PLN 70m).
▪ In Q3 2018, investments amounted to PLN 647m and the nominal value of purchased debt was PLN 3.7bn.▪ Still high, but more rational, level of competition, enabled KRUK to significantly increase investments in
Poland. In Romania, after a quiet beginning of the year, banks returned to the market with new transactions. The supply of debt portfolios in Italy and Spain remains strong.
Growth in Italy
▪ In Q1–Q3 2018, revenue on the Italian market reached PLN 70m, compared with PLN 55m in the corresponding period of 2017.
▪ Currently KRUK employs 333 people in Italy, and the carrying amount of its Italian portfolio as at the end of September 2018 was PLN 779m, accounting for 20% of the Group’s total debt portfolio.
▪ In Q3, the Group continued to develop its court-based procedures and a network of field consultants.
Financing
▪ In October 2018, KRUK made a private placement of bonds worth PLN 35m, maturing in five years and bearing interest at 3M WIBOR plus 3.50pp.
▪ The bonds were offered to institutional investors. It was the first bond issue conducted by KRUK since June 2017 (when KRUK issued five-year euro-denominated bonds with a fixed interest rate of 3.59%) and the first one denominated in the Polish złoty since December 2016 (when KRUK issued five-year bonds with an interest rate based on 3M WIBOR plus 3.15pp).
6
Agenda
Introduction
Operating activities
Financial performance
Additional information
7
KRUK reports second best quarter in its history in terms of the value of investments in debt portfolios
Nominal value of purchased debts (PLNm)
44,179
6,049
628
1 871
3,742
Q4 2017
Q1 2018
Q2 2018
Q3 2018
4,926
16,609 16,403
6,241
2015 2016 2017 Q1-Q3 2018
12,650
Investments in new debt portfolios (PLNm)3,807
210
125
282
647
Q4 2017
Q1 2018
Q2 2018
Q3 2018
489
1,286977 1,055
2015 2016 2017 Q1-Q3 2018
1,264
▪ The investments made by KRUK by the end of September 2018 totalled PLN 1,055m, more than in the entire 2017. The nominal value of the purchased portfolios was PLN 16.46.2bn.
▪ In Q3 2018 alone, KRUK invested PLN 647m in debt portfolios with a total nominal value of PLN 3.7bn. This was the second bestquarter in the Group's history in terms of investment value (in Q2 2016, Kruk invested PLN 667m, including nearly PLN 190m in the acquisition of portfolios from PRESCO, its competitor on the Polish market).
price in %
17%
15%
20%
3%
8
KRUK increases its debt acquisition activity in Poland and abroad
▪ Since the beginning of 2018, average monthly recoveries have exceeded PLN 120m.
▪ The macro situation supports positive debt recovery trends.
▪ Decrease of recoveries in Q3 2018resulted mainly from lower thanexpected recoveries from corporateportfolio in Poland and Romania
▪ Almost half (49%) of the investments made since the beginning of the year have been made on the Polish market.
▪ In Q3 2018, KRUK increased its activity in Italy, Spain and Romania.
▪ In 2018, cost to recovery ratio was relatively higher year on year, as more cases were taken to courts in Italy.
81
85
207
230
72
9
19
42
23
19
49
199
33
13
6
177
Q42017
Q12018
Q22018
Q32018
KRUK’s investments in debtportfolios
(PLNm)
Poland
Romania
Italy
Others
375
362
401
381
Q42017
Q12018
Q22018
Q32018
Recoveries from purchasedportfolios (PLNm)
228
205
212
220
23
47
51
37
37
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Revenue from purchased portfoliosand costs
(PLNm and as % of recoveries)
interestrevenue
revaluation
others*
-6
*including difference between actual and expected recoveries
35%
30%
27%
27%
9
The KRUK Group has invested in debt portfolios on seven European markets
Poland Romania Italy Other
Portfolio carrying amount as at September 30th 2018 (total: PLN 3.9bn)
47%
22% 20%11%
PLN 1.83bn
PLN 0.86bnPLN 0.78bn
PLN 0.45bn
3Investments (PLNm)
* 1,771
275 262 287 152
521
70
267197
2017 Q1-Q3 2018
2021
1
600333Revenue from purchased portfolios (PLNm)
502427
9 33
410316
63 37
1
248
(*) Germany – employees of the Polish-German organisation included in total for Poland.
- number of call centres - workforce
10
KRUK fares well on the competitive third party debt collectionmarket thanks to its high operational efficiency
6.2
13.3
10.1
Q1-Q32016
Q1-Q32017
Q1-Q32018
Gross profit on third party DC(PLNm)
23.2
44.9
48.2
Q1-Q32016
Q1-Q32017
Q1-Q32018
Revenue and gross margin on third party DC
(PLNm and as % of revenue)
4,303
11,236
9,452
Q1-Q32016
Q1-Q32017
Q1-Q32018
Nominal value of debt under management (PLNm) and
commission fees (PLNm and as % of nominal value)
27%
30%
21%
0,6%
0,4%
▪ The increase in the nominal value of debts outsourced for collection, revenue and margins in recent years is attributable to theacquisition of a servicing business in Spain (Espand) and in Italy (AgeCredit), and the effect of classification of the 33% share in the portfolio purchased together with IFC (International Finance Corporation) as the part serviced exclusively by the KRUK Group.
▪ KRUK performs well on the competitive third party debt collection market by leveraging economies of scale and high operational efficiency.
11
NOVUM and ERIF BIG businesses are a source of major support to the principal activities and positive contributors to overall performance
Novum year-on-year performance – financial highlights (in PLNm and thousands of loans)
▪ The NOVUM service is dedicated to the KRUK Group’s debtors in Poland and Romania who have repaid their debts or are repaying them in a timely manner, but bank loans are not available to them.
▪ NOVUM grants consumer loans of up to PLN 10,000 for periods from 3 to 30 months.
10.8
13.1
6.7 7.0
Q1-Q3 2018 2017
revenue gross profit
38.0 45.9
5.4
8.0
-
10,0
20,0
30,0
40,0
50,0
-
2,0
4,0
6,0
8,0
10,0
12,0
Q1-Q3 2018 2017
gross value
number of loans
ERIF Biuro Informacji Gospodarczej – financial highlights
8.5
10.7
5.97.3
Q1-Q3 2018 2017
revenue gross profit
42.6
36.0
47.0
32.0
-
10,0
20,0
30,0
40,0
50,0
-
10,0
20,0
30,0
40,0
50,0
Q1-Q3 2018 2017
value of cases (PLNbn)
number of entries(million)
▪ ERIF BIG's revenue reached PLN 8.7m, with gross profit at 69%.
▪ The base rose significantly after the company entered into cooperation with a large partner from the telecom market.
12
Agenda
Introduction
Operating activities
Financial performance
Additional information
13
KRUK – fast-growing and highly profitable business with strong cash flows
PLNmQ1-Q3
2017Q1 2018 Q2 2018 Q3 2018
Q1-Q3 2018
2017Q1-Q3 2018/
Q1-Q3 2017
% of 2017 full-year
Purchased debt portfolios
Investments in debt portfolios 766.5 125.4 281.8 647.5 1,054.7 976.5 38% 108%
Recoveries 994.0 362.4 400.7 381.0 1,144.1 1,368.9 15% 84%
Statement of profit or loss
Total revenue 806.9 285.3 319.6 288.6 893.5 1,055.5 11% 85%
Own debt portfolios 743.5 264.4 295.9 265 825.3 971.7 11% 85%
including revaluation 94.0 22.9 47.5 50.9 121.3 88.7 29% 137%
Third party debt collection 44.9 14.5 17.2 16.5 48.2 59.1 7% 82%
Other products and services 18.5 6.4 6.6 7.1 20.1 24.6 9% 82%
Gross profit 487.5 164.3 193.9 170.1 528.3 589.4 8% 90%
Gross profit margin 60% 58% 58% -57% 59% 56%
Own debt portfolios 462.2 157.3 186.3 162.3 505.9 559.2 9% 90%
Third party debt collection 13.3 3.1 3.8 3.2 10.1 14.9 -24% 68%
Other products and services 12.0 4.0 3.7 4.6 12.3 15.3 3% 80%
Overheads -103.9 -38.2 -40.4 -36.9 -115.5 -147.4 11% 78%
EBITDA 380.6 125.0 152.0 131.8 408.8 439.4 7% 93%
EBITDA margin 47% 44% 48% 46% 42%
NET PROFIT 291.3 90.7 98.6 90.0 279.3 295.2 -4% 95%
Net profit margin 36% 32% 31% 31% 31% 28%
ROE rolling 24% 17% 16% 17% 17% 20%
CASH EBITDA* 631.1 223.0 256.8 247.8 727.6 836.6 15% 87%
Source: KRUK S.A.*Cash EBITDA = EBITDA + recoveries from purchased debt portfolios - revenue from collection of purchased debt.
14
The KRUK Group – P&L by geographical segments (presentation format)
PLNm Q1-Q3 2017 Q1 2018 Q2 2018 Q3 2018 Q1-Q3 2018 2017Q1-Q3 2018/Q1-Q3 2017
% of 2017 full-year
figure
Revenue 806.9 285.3 319.6 288.6 893.5 1,055.5 11% 85%
Poland 389.9 142.9 161.4 144.7 449.0 551.9 15% 81%
Romania 308.7 111.8 121.7 90.0 323.5 436.2 5% 74%
Italy 54.7 25.2 14.0 30.7 69.9 13.3 28% 526%
Other countries 53.6 6.3 21.6 23.1 51.0 54.1 -5% 94%
Gross profit 487.5 164.3 193.9 170.1 528.3 589.4 8% 90%
Gross profit margin 60% 58% 61% 59% 59% 56%
Overheads -103.9 -38.2 -40.4 -36.9 -115.5 -147.9 11% 78%
EBITDA 380.6 125.0 152 131.8 408.8 439.4 7% 93%
EBITDA margin 47% 44% 48% 46% 46% 42%
Finance income/costs -67.8 -30.5 -36.0 -28.3 -94.8 -85.6 40% 111%
including exchange rate changemovements
-7.6 -8.9 -9.1 -6.8 -24.8 -1.1
Net profit 291.3 90.7 98.6 90.0 279.3 295.2 -4% 95%
Net profit margin 36% 32% 31% 31% 31% 28%
Source: KRUK S.A.
15
The KRUK Group – strong cash flows supporting high liquidity of operations
PLNm Q1-Q3 2017 Q1 2018 Q2 2018 Q3 2018 Q1-Q3 2018 2017Q1-Q3 2018/Q1-Q3 2017
% of 2017 full-year
figure
Cash flows from operating activities: 475.0 215.6 211.5 229.2 656.3 641.4 38% 102%Recoveries from debtors − purchased debt portfolios
994.0 362.4 400.7 381.0 1,144.1 1,368.9 15% 84%
Operating costs − purchased debt portfolios -281.3 -107.2 -112.5 -99.7 -319.4 -412.5 14% 77%
Operating margin − third party DC 13.3 3.1 3.8 3.2 10.1 14.9 -24% 68%
Administrative expenses -103.9 -38.2 -40.4 -36.9 -115.5 -147.9 11% 78%
Other operating cash flow -147.2 -4.5 -40.1 -18.4 -63.0 -182.0 -57% 35%
Cash flows from investing activities: -777.8 -130.5 -288.1 -650.9 -1,069.5 -996.4 38% 107%
Investments debt portfolio purchases -766.5 -125.4 -281.8 -647.5 -1,054.7 -976.5 38% 108%
Other investing cash flow -11.3 -5.1 -6.3 -3.4 -14.8 -19.9 31% 74%
Cash flows from financing activities 165.2 -53.1 33.8 410.8 391.5 261.0 137% 150%
Issue of shares 0.0 0.0 0.0 0.0 0.0 0.0
Increase in borrowings and lease liabilities 941.2 198.6 517.4 1,014.3 1,730.3 1,233.4 84% 140%
Issue of bonds 168.4 0.0 0.0 0.0 0.0 168.4
Decrease in borrowings and lease liabilities -911.5 -219.1 -384.5 -637.9 -1,241.5 -1,005.9 36% 123%
Redemption of bonds -120.0 0.0 -15.0 -50.0 -65.0 -135.0 -46% 48%
Other financing cash flow 87.0 -44.0 -72.7 84.4 -32.3 0.1
Net cash flows: -137.8 32.0 -42.8 -10.9 -21.7 -94.1 -84% 23%
Source: KRUK S.A.
16
KRUK has ample room on its balance sheet and enjoys access to healthy financing sources to fund further investments
3,920
404
2,617
1,707
Aktywa Pasywa
115209
88
540451
35
1 3241 115 1 026
48635 0
2018 2019 2020 2021 2022 2023
Net debt/equity 1.3xNet debt/cash EBITDA: 2.3x
1,357
979
699
Kategoria 1
Bank loans % 1M/3M WIBOR + 1.0−2.2pp
1M/3M EURIBOR + 2.2−3.25ppPLN 1,678m, including 75% available also in EUR
Other assets
Equity
% 3M WIBOR + 2.5-4.5pp Fixed rate: 3.0-4.5pp
in PLN: PLN 1,101min EUR: EUR 256m
Bonds
Amount available (undrawn) under credit facilities
Debt under bank loans (drawn)
Liabilities under bank loans and bonds*As at: Sep 30 2018 (planned for redemption in the given year, balance at end of period)
Investments in debt portfolios
Bonds outstanding* Planned for redemptionLiabilities
* Nominal value.
17
The KRUK Group – selected items of the statement of financial position (presentation format)
PLNm Jun 30 2018 Dec 31 2017 Sep 30 2018
ASSETS
Cash and cash equivalents 162.5 173.3 151.6
Investments in debt portfolios and loans 3,486.2 3,169.3 3,985.9
Other assets 200.1 217.5 186.5
Total assets 3,848.8 3,560.1 4,324.0
EQUITY AND LIABILITIES
Equity 1,646.1 1,460.5 1,707.4
of which: Retained earnings 1,235.3 1,112.0 1,299.0
Liabilities 2,202.7 2,099.6 2,616.6
of which: Bank loans and leases 612.0 499.0 988.9
Bonds 1,394.9 1,398.3 1,340.1
Total equity and liabilities 3,848.8 3,560.1 4,324.0
METRICS
Interest-bearing debt 2,006.9 1,897.2 2,329.0
Net interest-bearing debt 1,844.4 1,723.9 2,177.4
Net interest-bearing debt to equity 1.1 1.2 1.3
Interest-bearing debt to 12-month cash EBITDA 2.0 2.1 2.3
Source: KRUK S.A.
18
Agenda
Introduction
Operating activities
Financial performance
Additional information
19
20 years of KRUK’s history and 7 years of KRUK’s presence on the WSE: strong value growth based on healthy fundamentals
2011 2012 2013 2014 2015 2016 2017 CAGR
EPS (PLN) 4.03 4.80 5.77 8.95 11.84 14.08 15.74 25.5%
EPS growth rate 72.2% 19.1% 20.2% 55.1% 32.3% 18.9% 11.8% -
ROE rolling 27.9% 25.6% 23.5% 25.9% 26.0% 24.3%* 20.1% -
Net profit 66.4 81.2 97.8 151.8 204.3 248.7 295.2 28.2%
0
50
100
150
200
250
300
350
400
0
5
10
15
20
25
30
2011 2012 2013 2014 2015 2016 2017 2018
KRUK shares on the WSE***
Share price PLN 200.80
Change since IPO / YTD +403% / -22%
1Y Max/Min PLN 293.58 / 170.00
Market capitalisation PLN 3.8bn
KRUK’s position on the WSE in terms of market capitalisation: 37
Stock trading liquidity
Average daily trading volume
PLN 10m
Free float**** 89%
KRUK's position on the WSE in terms of liquidity: 17
KRUK share price and P/E ratio ** Starting from the Company’s IPO on the WSE
KRUK share price (right axis)
P/E (left axis)
(*) Equity at end of period, excluding the share issue of December 2016.(**) P/E – price-to-earnings ratio, calculated on the basis of performance in the last four quarters.(***) Source: Stooq.com, GPWInfostrefa.pl, data as at October 23rd, 2018, or GPW.pl, data as at September 2018.(****) Free float - shareholders with a holding of less than 10%.
20
IR events
Most recent recommendations Financial statements release dates in 2018
Date Financial statements
March 19th 2017 full-year financial statements
April 26th Q1 2018 financial statements
September 7th H1 2018 financial statements
October 28th Q3 2018 financial statements
Date InstitutionRecommendatio
nTarget price
September 2018 mBank buy 293.0
July 2018 DM Trigon hold 220.0
April 2018 DM BDM buy 301.0For more details, go to:pl.kruk.eu/relacje-inwestorskie/raporty/raporty-analityczne
Selected IR events planned for 2018
Sell-side analysts covering KRUKDate Event
Mar 21-22 [London] PKO BP Polish Capital Market Conference
Mar 21-22 [Frankfurt, Vienna] Investor meetings
Mar 26-27 [Boston, NYC] Investor meetings
Apr 10 [Stockholm] Wood Polish Innovation & Growth Conference
May 23-24
[New York] Wood CEE Investor Days 2018 Conference
May 25-27
[Karpacz, Poland] Wall Street 2018 Conference
Jun 13-14 [Warsaw] Wood Emerging Europe Financials Conference
Sep 11 [Warsaw] Pekao IB/Emerging Europe Conference
Oct 1 [Bucharest] Raiffeisen Polish Day in Bucharest
Oct 5 [Warsaw] mBank Conference
Oct 11 [Stegersbach] Erste Investor Conference
Oct 29-30 [New York] Auerbach Frontier & Emerging Conference
Dec 6-7 [Prague] Wood Winter 2018 conference
Institution Analyst Email address
DM BDM Maciej Bobrowski [email protected]
DM BZ WBK Dariusz Górski [email protected]
Vestor DM Michał Fidelus [email protected]
Erste Group Mateusz Krupa [email protected]
Pekao IB Kamil Stolarski [email protected]
Ipopema Łukasz Jańczak [email protected]
JP Morgan Michał Kuzawiński [email protected]
DM mBanku Michał Konarski [email protected]
DM PKO BP Jaromir Szortyka [email protected]
DM Trigon Grzegorz Kujawski [email protected]
Wood & Co.Marta Jeżewska-
Wasilewska
marta.jezewska-
21
Disclaimer
This presentation has not been prepared in connection with any public share or bond offering of KRUK S.A. Thepresentation is for information purposes only and as such should not be treated as an invitation, proposal or offer to purchase any financial instruments. Investing in KRUK S.A. shares and bonds involves risks inherent in suchfinancial instruments.
To the best of KRUK S.A.'s knowledge, the information contained in this presentation is consistent with the Company's financial statements available at http://en.kruk.eu/en/for-investors/reports/interim-reports/, which are the only source of binding financial and non-financial information on KRUK S.A. The information presented herein should not be construed as a representation or warranty concerning the Company's future performance and results of operations.
Neither KRUK S.A. nor any of the parties acting on its behalf shall be liable for any losses resulting from improperuse of this presentation or any information contained herein.
KRUK S.A.8 Wołowska St.
51-116 Wrocław, Polandwww.kruksa.pl
Investor Relations: [email protected] investors: https://en.kruk.eu/investor-relations
